Origins of Stock Market Fluctuations

Daniel Greenwald, Martin Lettau and Sydney Ludvigson

No 19818, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Three mutually uncorrelated economic disturbances that we measure empirically explain 85% of the quarterly variation in real stock market wealth since 1952. A model is employed to interpret these disturbances in terms of three latent primitive shocks. In the short run, shocks that affect the willingness to bear risk independently of macroeconomic fundamentals explain most of the variation in the market. In the long run, the market is profoundly affected by shocks that reallocate the rewards of a given level of production between workers and shareholders. Productivity shocks play a small role in historical stock market fluctuations at all horizons.

JEL-codes: G0 G12 (search for similar items in EconPapers)
Date: 2014-01
New Economics Papers: this item is included in nep-cfn, nep-fmk and nep-his
Note: AP EFG
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Citations: View citations in EconPapers (30)

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Related works:
Working Paper: Origins of Stock Market Fluctuations (2015)
Working Paper: The Origins of Stock Market Fluctuations (2014)
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